Foreign investors who fled Indian markets amid the AI mania may soon return home. A comprehensive report highlights how the diminishing noise around AI technologies is reshaping global investment flows in India’s favor.
The AI surge led to record FII exits from India, totaling over $20 billion in recent quarters. U.S.-centric portfolios dominated as funds chased Nvidia, OpenAI, and other AI darlings. But with profit-taking and valuation corrections hitting tech stocks, the narrative is changing.
India’s strengths shine brighter in this new landscape. With GDP growth projected at 7% for the fiscal year, controlled inflation, and a burgeoning middle class, the country offers superior risk-reward profiles. ‘Emerging markets are back on the radar,’ declares the report, pegging India as the top destination.
Inflows could target undervalued blue-chips in financials, infrastructure, and manufacturing. Early indicators are positive: benchmark indices have stabilized, and currency pressures are easing.
The report delves into historical parallels, noting similar patterns post-dotcom bust when EMs rallied strongly. It projects $15-20 billion in FII investments into India over the next 12 months.
Challenges persist, including U.S. election uncertainties and oil price volatility. Yet, the consensus is clear: the AI cooldown represents a golden window for India’s capital markets to reclaim their allure.